Sunday, August 27, 2017

Trump Team Considering Taxing 401Ks

As I have pointed out many times here at EPJ, Trump tax "reform" is mostly a scam.

It is mostly just shifting the points of taxation rather than any serious tax cuts.
Consider this new report from Politico (my bold):

President Donald Trump’s top aides and congressional leaders have made significant strides in shaping a tax overhaul, moving far beyond the six-paragraph framework pushed out in July that stoked fears about their ability to deliver on one of the GOP’s top priorities.

There is broad consensus, according to five sources familiar with the behind-the-scenes talks, on some of the best ways to pay for cutting both the individual and corporate tax rates.

The options include capping the mortgage interest deduction for homeowners; scrapping people's ability to deduct state and local taxes; and eliminating businesses' ability to deduct interest, while also phasing in so-called full expensing for small businesses that allows them to immediately deduct investments like new equipment or facilities....

One idea quietly being discussed would be taxing the money that workers place into their 401(k) savings plans up front: an idea that would raise billions of dollars in the short-term and is pulled from the Camp plan.

There may be some reductions in taxes at the margin for some in the tax reform. But the problem is there are no serious plans to cut government spending. This means there will be little in the way or real tax cuts and the deficit is likely to mushroom under Trump.

The justification will be made that the deficit expansion will provide growth.

Politico again:

Top White House officials are less concerned about adding to the deficit because many believe that the economic growth stemming from lower tax rates will make up any budget shortfalls.

It is not clear whether Trump could pull off the taxation of 401Ks now. There would likely be too much of a public uproar at this time but the government tax technocrats are eyeing those funds so be warned. A few cycles of tax reform down the road, after they have softened public opinion, a 401K tax could very well be implemented.

In the meantime, they will sneak in other less visible taxes to balance out tax cuts.-RW
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